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Common Versus Preferred Stock

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Sally and Ed are thinking about raising more working capital through issuance of another class of stock to finance future projects. They ask for your opinion on whether they should issue common stock or preferred stock.

Sally and Ed's goal is to retain as much of their management rights as possible. What type of stock would you recommend they issue and why?

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Solution Summary

The solution explains whether a firm should raise additional capital through common or preferred stock.

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I would strongly recommend that Sally and Ed, if their primary concern is retention of management rights, issue preferred stock.

Common stock affords investors voting rights and, therefore, a significant ...

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